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Guardian

Tailoring of Contract Terms and Conditions – Commercial Items

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I request the forum’s input concerning Tailoring of Provisions and Clauses for the Acquisition of Commercial Items the basis of which is the guidance provided under FAR section 12.302.

QUESTION #1: FAR 12.302(b)(4), prohibits the tailoring of paragraph at 52.212-4(g) Invoice, which “implement statutory requirements."  My agency’s policy department requires the use of an agency-specific invoicing clause. Every other agency for which I have worked has required the incorporation of a unique invoicing clause.  Whereas FAR section 2.101, Definitions does not define the term tailor[ing], I believe it to mean the process by which we not only change existing terms and conditions, but also by which we may append or add to them.  My legal advisor indicated he does not see a problem with supplementing the commercial item terms as they apply to invoicing, as long as we do not omit any of the conditions implemented by statute; see 52.212-4(g)(1), “an invoice must include [emphasis added] – .”  I have seen other COs simply incorporate in full text their agency’s specific invoicing clause, along with the requirements under Contract Terms and Conditions – Commercial Items, rather than through tailoring/addenda.  Perhaps there is nothing inherently wrong with this method, assuming the terms and conditions in the agency specific clause do not conflict with those in 52.212-4.  However, part 12 seems pretty clear that tailoring of T's&C's already addressed in the commercial item clause are to be effectuated through addenda.  To simply sticking another set of instructions having to do with invoicing somewhere else in the solicitation strikes me as a contravention of this imperative.  I tend to think that in creating our solicitation document, we should make it quite apparent to our readers that we have thoroughly read and are aware of all the commercial item T’s&C’s, and that any supplementation is done through allowable practices. Perhaps the most important terms included in the agency-specific clause are the electronic inbox, i.e., email address, and snail-mail address for invoice submission.  How might the practitioners on this site reconcile the prohibition on tailoring of 52.212-4(g) with the agency’s published policy? 

QUESTION #2: FAR12.302(c) Tailoring inconsistent with customary commercial practice states the following, “The contracting officer shall not tailor any clause or otherwise include any additional terms or conditions in a solicitation or contract for commercial items in a manner that is inconsistent with customary commercial practice for the item being acquired unless a waiver is approved in accordance with agency procedures.  I am seeking to tailor 52.212-4(a) Inspection/Acceptance to supplement the language in this paragraph with language substantially the same as that found in clauses 52.246-4 Inspection of Services – Fixed-Price and 52.246-6 Inspection – Time-and-Material and Labor Hour.  These latter clauses require the contractor to “provide and maintain an inspection system acceptable to Government….”  In consulting with my legal advisor, he questioned whether these additional requirements are in accordance with “customary commercial practice,” noting that if a case can be made that they are not, then I have not obtained an approved waiver through my agency as I am required.  When I asked what he considered “customary commercial practice,” (“CCP”) he responded in so many words “who knows[?],” implying that the terms may be construed as ambiguous and subject to some debate.  He went on to say that there is precedent whereby offerors have some window of time to call into question the tailoring of the clause and assert their belief that the inspection system runs afoul of CCP.  Perhaps someone has a relevant legal and/or GAO citation.  Do you believe that the inspection terms and conditions described in the FAR part 46 clauses comport with CCP?

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QUESTION #1 -- Looking at subparagraphs (i) through (x) of FAR 52.212-4, para. (g)(1), which of those specific subparagraphs is tailored by your additional instructions?

QUESTION #2 -- If you believe the FAR part 46 clauses are consistent with customary commercial practice, include them in your solicitation.  If a prospective offeror thinks otherwise, it may raise its hand and say so -- then, based on what you learn from engaging with that prospective offeror, you might change your mind, or not.

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3 hours ago, ji20874 said:

If you believe the FAR part 46 clauses are consistent with customary commercial practice, include them in your solicitation

Using the quote as an example.  No doubt it is implied by the OP and ji but absent from both questions and answers is the requirement for market research on which the decision for tailoring shall and must be based.  Not belief but research and determinations!

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I apologize for the strikethroughs in my original posting.  I have typed long posts on here before only to have the screen time-out and not refresh.  To counteract this, I sometimes type my longer posts/contributions on a Word document first, then cut and paste. Evidently the WIFCon application is not completely tolerant of this approach. I do not have time to retype, so hopefully the readability is not too much an issue.

 

On 3/11/2019 at 10:52 AM, ji20874 said:

QUESTION #1 -- Looking at subparagraphs (i) through (x) of FAR 52.212-4, para. (g)(1), which of those specific subparagraphs is tailored by your additional instructions?

ji20874, to answer your follow up question, all of the invoice content requirements, (i) through (x) are found in the agency-specific invoicing clause.  However, the ASC adds some additional requirements, i.e., DUNS number, agency program office designated on the order/contract/agreement, mark invoice as "Interim" (Ongoing performance and additional billing expected) and "Final" (performance complete and no additional billing), and Invoice Supporting Documentation, which is, to ensure payment, the vendor must submit supporting documentation which provides substantiation for the invoicing costs to the Contracting Officer's Representative (COR) or Point of Contact (POC) identified in the contract. Invoice charges must align with the contract CLINs.  Supporting documentation is required when guaranteed minimums are exceeded and when allowable costs [I see the inherent problem using this term in a commercial item contract, but again this is boilerplate per agency-policy] are incurred.

Again, allow me if I may to highlight what I believe to be the crux of this debate--is tailoring only when you substantially remove or change/revise language to say something else or (as I have always presumed), does the term apply any time one adds new language or affects existing language in any manner?.  We all know that when you add something, such as adding condition (xi) after (i) through (x), it can potentially make all the difference in the world.  I do not see how adding language to a clause, or affecting it by presenting a different or somewhat longer version of it elsewhere in the solicitation is not akin to tailoring it, aside from that fact that you are not doing it properly by doing it as the FAR permits, which is through addenda.

BTW, ji20874, I am a long-time reader, more recent contributor and I must say I have benefited from many of your insights. Without devaluing the contributions of so many other members, I find you to be one of the sharper, more insightful contributors (but don't let it get to your head).  I appreciated that you chimed in on this so quickly.

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Guardian:

I just saw your post with the strike-throughs.  The software had a hiccup.  It's easy to correct but I am on my way out the door.  I will fix your post when I am home again.

Bob

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Guardian, This isn't the hill where you want to fall on your sword.  If your additional invoicing instructions do not offend (g)(1)(i) through (x) of 52.212-4, just include the instructions in your solicitation. To convince your office to drop its mandated use of the instructions is likely an impossible challenge. Any prospective offeror may raise its hand to object after you release your draft solicitation (or final, if you don't do a draft, but I really like releasing drafts especially for important acquisitions), but absent offeror input, the fight is likely too hard.

Carl, Absolutely right about market research!

Guardian, Your robust market research should shape your belief about customary commercial practice.  Your market research should tell you how the services you are buying are bought and sold in the commercial sector.

I have no problem with trial balloons -- put out a draft solicitation, and specifically ask for input from prospective offerors on invoicing instructions and the FAR inspection clauses to verify your belief based on your market research.  I suspect the requirement to provide and maintain an inspection system acceptable to the customer is not customary commercial practice, but I don't know what market sector you are in.  Your prospective offerors should be able to speak for themselves.  BTW, did you know that Alternate I to 52.212-4 already provides inspection text that is supposed to be appropriate for commercial T&M buys?

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For what it is worth, I think FAR 12.302(b)(4) is flat wrong.  FAR 52.212-4(g) is supposed to be a contractual implementation of the Prompt Payment Act.  31 U.S.C. 3901(a)(3) states “'proper invoice' is an invoice containing or accompanied by substantiating documentation the Director of the Office of Management and Budget may require by regulation and the head of the appropriate agency may require by regulation or contract."  Thus, contrary to 12.302, the PPA does not say what must be in an invoice for the invoi8ce to be considered proper.  Moreover, note that the statute says what must be included in an invoice is to be determined by OMB and the head of the relevant agency.  Thus, the statute gives broad discretion to OMB and the agencies concerning what is to be in an invoice.

The rules issued by OMB and found in 5 CFR 1315 say that an invoice is to include

(i) Name of vendor;

(ii) Invoice date;

(iii) Government contract number, or other authorization for delivery of goods or services;

(iv) Vendor invoice number, account number, and/or any other identifying number agreed to by contract;

(v) Description (including, for example, contract line/subline number), price, and quantity of goods and services rendered;

(vi) Shipping and payment terms (unless mutually agreed that this information is only required in the contract);

(vii) Taxpayer Identifying Number (TIN), unless agency procedures provide otherwise;

(viii) Banking information, unless agency procedures provide otherwise, or except in situations where the EFT requirement is waived under 31 CFR 208.4;

(ix) Contact name (where practicable), title and telephone number;

(x) Other substantiating documentation or information required by the contract.

Note item (x) in the OMB rules.  It is not included in the list of items in 52.212-4(g) that is to be considered in determining if an invoice is proper.  In this regard, notice what 52.232-25 lists as the elements of a proper invoice.  What is in 52.232-25 is consistent with the OMB rules while what is in 52.212-4(g) is not.

From what is in the PPA and the implementing OMB rules, I think Guardian's agency is on solid ground to require additional information to be included in an invoice.  Moreover, to me 52.212-4(g) reflects a drafting error on the part of the FAR Councils.

 

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2 hours ago, Guardian said:

Again, allow me if I may to highlight what I believe to be the crux of this debate--is tailoring only when you substantially remove or change/revise language to say something else or (as I have always presumed), does the term apply any time one adds new language or affects existing language in any manner?

Following FAR 1.108(a) convention, tailor means "make or adapt for a particular purpose."

This case involved tailoring of 52.212-4 invoicing procedures: Crescent Helicopters File, B-284706; B-284707; B-284734; B-284735, May 30, 2000. The agency found a way around the tailoring restriction altogether. 

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16 hours ago, Retreadfed said:

From what is in the PPA and the implementing OMB rules, I think Guardian's agency is on solid ground to require additional information to be included in an invoice.  Moreover, to me 52.212-4(g) reflects a drafting error on the part of the FAR Councils.

 

Retread, thank you.  How can it not be a drafting error?  Any invoicing clause (terms and conditions) should be all-inclusive?  Assume for a second that all I have in terms of invoicing instructions is what is written into 52.212-4(g).  This is great guidance for creating an invoice under a uniform format, but where do I send it off to?  Each agency is going to have a different physical address and email address/inbox.  When we apply the dictionary definition of tailoring as the default definition, minus any definition under part 2, we see that the terms refers to any instance in which one changes, adds to or makes specific for a particular purpose or person.  I had a few pairs of pants tailored recently.  Sometimes the tailor adds fabric, sometimes they remove, other times they just readjust the seam or cuffs.  I am not looking to die on any hill.  But I believe FAR part 12 by far (NPI) to be the most important part, as the bulk of what agencies buy or should be buying are CIs.  Since FASA and even before, part 12 remains the most applicable part.  Part 12 always supersedes, takes precedence over any other part in which it is in contradiction.  I know the FAR is an imperfect set of regulation, but 52.212-4 goes in the overwhelming majority of contracts nowadays.  It was revised in October 2018.  It could have been corrected then.  There is also some overall frustration.  Since last week I have two separate senior/supervisory COs tell me things such as, "not sure if that can be considered a commercial item, look at the dollar amount," and "ok, we can use part 12 if you want, we don't have to use part 15."  Please do not even respond to these last two statements by telling me what I already know.  I am simply injecting some morose humor into the conversation.  But these comments were made and I shudder. 

15 hours ago, Jamaal Valentine said:

Following FAR 1.108(a) convention, tailor means "make or adapt for a particular purpose."

This case involved tailoring of 52.212-4 invoicing procedures: Crescent Helicopters File, B-284706; B-284707; B-284734; B-284735, May 30, 2000. The agency found a way around the tailoring restriction altogether. 

Jamaal, I thank you for this GAO case.  I am going to pass it on to some of my advisors.  As we can see, the GAO ruled here that tailoring the invoice terms and conditions under 52.212-4(g) is acceptable because the alternate invoicing form was not made mandatory under the contract.  Ok?  So what shall I do in the case of the agency-specific "mandatory" invoicing clause?  Should I say within the contract language that it is optional or discretionary?  As Ji already recommended, I will likely just stick it in the RFP a few pages down from 52.212-4 and I am fairly confident it will never become a practical issue.  What I am seeking to do here, is have an advanced practitioner's discussion about things in the FAR that don't make much sense and which probably ought to be changed.

With respect to the commercial item practices, I intend to release a draft RFP and accept feedback from the industry.  As Crescent Helicopters says, "There is no prohibition in the regulation against the granting of waivers following the issuance of the RFP."

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Guardian,

Regarding your agency invoicing clause, could you include a statement that the agency clause supplements, but does not supersede, para. (g) of 52.212-4?

I applaud your willingness to engage in professional dialogue.  That is so important for our career field, and yet seems to be avoided by many.

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Actually I think the answer to question 1 is very easy.   I reconcile  the agency's approach as meeting the definition of a "deviation".  Reference FAR subpart 1.401(f).   This is not a conclusion that the agency followed the full requirements to refine the approach as a class deviation.  By my read even the absence of the refining efforts would not negate the fact that it is by definition a deviation.    

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12 minutes ago, Retreadfed said:

Carl, what does 52.212-4(g)(2) mean to you?

I do not get the point of your question.

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What does it mean to handle invoices in accordance with the PPA and OMB regulations?  Are all of the regs applicable to the handling of invoices or only certain ones?  If only certain parts of the regs apply, which ones?

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@Retreadfed  I understand where you are going but by my read you have not considered all facts in your discussion.  

52.212-4(e) provides that the definitions of FAR 52.202-1 is incorporated.  Which in turn means the definitions of terms in FAR 2.101 apply.  FAR 2.101 provides that an " “Invoice” means a contractor's bill or written request for payment under the contract for supplies delivered or services performed (see also “proper invoice”)." and that a "“Proper invoice” means an invoice that meets the minimum standards specified in 32.905(b)."   Reading the minimum standards seems to catch the very issue you mention.

My conclusion is that the 52.212-4 clause might be lacking in detail but a person does need to look elsewhere to reconcile that what the agency is doing is ok, whether it be the track on proper invoice or simply writing it off to a deviation. 

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Is what is defined as a proper invoice in 32.905 the same as what is in 52.212-4(g)?  Is what is in 5 CFR 1315 a part of a contract that contains 52.212-4(g)?

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34 minutes ago, Retreadfed said:

Is what is defined as a proper invoice in 32.905 the same as what is in 52.212-4(g)?  Is what is in 5 CFR 1315 a part of a contract that contains 52.212-4(g)?

Yes, following the track of the definition of invoice to proper invoice as I have provided.  First you have invoice then you must determine proper invoice.

No but it is a part of what a proper invoice is as described in 32.905 which is a part of a contract pursuant to application of the definitions clause.

In the end while I might agree that the FAR drafters do not always get it there are reasonable ways within the context of the FAR to reconcile that the OP's agency is okay.  It can be a tailor, it can be a supplement of the terms and conditions, it can be interpretation of what a proper invoice is all applicable definitions considered, or it could be a deviation.

20 hours ago, ji20874 said:

This isn't the hill where you want to fall on your sword

 

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4 hours ago, C Culham said:

Actually I think the answer to question 1 is very easy.   I reconcile  the agency's approach as meeting the definition of a "deviation".  Reference FAR subpart 1.401(f).   This is not a conclusion that the agency followed the full requirements to refine the approach as a class deviation.  By my read even the absence of the refining efforts would not negate the fact that it is by definition a deviation.    

How is it a deviation?  It is neither an individual deviation nor a class deviation, either of which would require authorization by the agency head.  I am not aware that our agency head has signed anything authorizing a deviation to supplement or change FAR 52.212-4(g).  Shouldn't the agency head sign a memorandum identifying it as such and authorizing it through her signature?  I would think so.

Again, I have worked at many agencies and every one had a agency-specific invoicing clause required to be incorporated into all contracts.  This seems to me to be a CAAC and DARC issue.  They need to get off their duffs and revise the prohibition on tailoring of the commercial item invoicing conditions.  How about the increase in the SAT from $150k to $250k, as well as increases to the micropurchase thresholds.  The applicable statutes were revised over a year ago.  Why does the FAR still say $150k.  Some folks are still confused and there are agencies that have not yet gotten around to authorizing class deviations, despite GSA handing them the language. 

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3 hours ago, Guardian said:

How is it a deviation?

It seems you are aware of the difference between a policy and a regulation.  With that said are you sure that your agency head or designee has not authorized the additional information required?  By my experience your view of other agencies is true.  However in the drill down I have found that the  agency head or his/her authorized designee (ref. FAR 1.404) have signed off on the policy.  The agencies hygiene in perfecting the policy may not strictly adhere to the FAR 1.4 as a deviation but all the same it turns out to be a deviation.   Yes clarity could be better but is it the clarity of the FAR or of your agency that is needed? 

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Guardian:

I just saw your post with the strike-throughs.  The software had a hiccup which I an correct.  I am on my way out the door.  If it isn't fixed within minutes, I will fix your post when I am home again.  The conversion of the word document added lines of puncutaton that I must carefully eliminate.  I will complete my editing when I return.

This is going to take me several sessions to edit.  It won't be as you hoped but it takes a long time to remove all the mess.

Bob

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21 hours ago, C Culham said:

It seems you are aware of the difference between a policy and a regulation.  With that said are you sure that your agency head or designee has not authorized the additional information required?  By my experience your view of other agencies is true.  However in the drill down I have found that the  agency head or his/her authorized designee (ref. FAR 1.404) have signed off on the policy.  The agencies hygiene in perfecting the policy may not strictly adhere to the FAR 1.4 as a deviation but all the same it turns out to be a deviation.   Yes clarity could be better but is it the clarity of the FAR or of your agency that is needed? 

Carl, my agency publishes a list of deviations that it posts on its website via memoranda, which are signed by the chief procurement officer. The agency-specific invoicing clause at issue is not included within that list of deviations.  Also, my agency has its own acquisition regulation that parallels the numbering in the FAR preceded by the number of my agency's designated chapter within Title 48 of the Code of Federal Regulations and followed by "-70" and higher for those clauses for which there are no counterparts.  I have reviewed the AS invoicing clause again.  There is no codification.  It is plainly entitled "Invoice Instructions."  So then, I would define the clause as a policy, likely specific to my component, and not necessarily other acquisition offices within the agency.  That said, I will move forward and figure out how best to incorporate the clause in the RFP and contract vis-à-vis the invoicing language under 52.212-4(g).  We often do what we have to do, as federal contracts and the associated body of guidance are imperfect.  Is this an informal deviation of sorts?  I suppose it could be considered as much.  While that might not be what I would label it, I will not besmirch your attempt to apply an out-of-the-box label or explanation.  Having spoken to my attorney, I feel confident that supplementing the commercial item invoicing language is wholly permissible, primarily because we are not seeking to remove any of the language mandated by statute.  I think another way to look at this is, what was the legislators' intent and might they have a problem adding a few seemingly essential bits of information to make sure our hard-working contractors get paid on time? If the impetus behind the language to begin with was the Prompt Payment Act, then I would say that answer is a resounding "no," they would not have a problem with it.

 

6 hours ago, bob7947 said:

Guardian:

I just saw your post with the strike-throughs.  The software had a hiccup which I an correct.  I am on my way out the door.  If it isn't fixed within minutes, I will fix your post when I am home again.  The conversion of the word document added lines of puncutaton that I must carefully eliminate.  I will complete my editing when I return.

This is going to take me several sessions to edit.  It won't be as you hoped but it takes a long time to remove all the mess.

Bob

 

Thanks, Bob.  Whatever you could do would be much appreciated.  It does not have to be perfect. Thanks for helping to make my humble words readable to the masses.

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27 minutes ago, bob7947 said:

Guardian:  

There are italics throughout the text.  Do you want the italics removed?

Bob, the italics were in select portions.  You can remove them altogether, probably easiest.  Thanks again.

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